Even the Wall Street Journal has come to question, at least, the dignity of corporations holding out a tin cup before agreeing to setup shop in America. Referring to the decision by heavily subsidized Evergreen Solar to move to China in exchange for a better deal, the journal had this to say.
One of the least edifying spectacles in American business is the sight of industry titans begging politicians for alms…
…Capitalism is supposed to be about risk-taking and bearing the consequences, win or lose. Lobbyists like Mr. Resch—and his industry bosses—give capitalists a bad name.
Some of Coos County’s self proclaimed business leaders should read the article. In an especially egregious example of corporate welfare wasted upon the ungrateful, Evergreen Solar will cost the state of Massachusetts $50 million with its decision to leave only two years after receiving $43 million in subsidies to locate in the state.
In addition to contributing to a growing trade imbalance, Robert Scott, senior international economist at the Economic Policy Institute warns that not only are we losing jobs to China’s aggressive investment in renewable energy, we are also losing access to technology. The White House announced a list of trade deals with China totaling $45 billion that includes agreements with Boeing and GE. (Economist Dean Baker calls this move a fly speck compared to the enormity of the trade imbalance).
GE is essentially giving away its technological keys to the kingdom in exchange for a few short-term sales. They’ve set up a joint venture with a Chinese company. They throw in $200 million and their most advanced avionics technology to their Chinese partner, who pays them handsomely for it, who puts in $700 billion, and in return they’re going to get some sales to Chinese aircraft manufacturers, which many other companies have been competing for. But there’s a pattern here. What happens is that the Chinese joint venture partners tend to suck the technology out of their foreign partners, and then they kick them aside in a few years. So, GE says this deal is good for 50 years; I can almost guarantee you that the deal will end in just a few years. And as a result, GE will find that it’s no longer in the business of making avionics equipment. That business will have shifted to this Chinese company. And that’s the problem we run into.
Consider the stranglehold China has over rare earths and high gauss magnets after the Bush administration allowed the manufacturing of magnets to move out of the US.
Investing in renewable resources will always outperform tax breaks. That said, subsidies are still focused around centralized power production, a payoff is much longer coming in this instance. Taxpayer investment in distributed energy sources will have a better payoff, even in fossil fuel powered generation, than the centralized model.
Hi Mary, I think the ROI measure is logical and reasonable if applied appropriately. It strikes me that job creation via conventional investment, would out perform both individual and corporate welfare. For example, if you or I invested in the construction of wind turbines wouldn’t that be vastly better? Maybe an ROI of 3.0?
Hi Bert, I think it has to be looked at in terms of ROI, return on investment to the taxpayer. Foodstamps and unemployment for example pay back $1.60+ for ever dollar invested.
Compare that to tax credits to businesses which lose as much as .80 cents per dollar.
What are reasonable limits on welfare for organizations and individuals?